Economic profile of a sector

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Economic profile of the sector is used in the analysis of the competitive environment, which determines the conditions for all firms in the sector. It is a method of assessing the reality in which the company operates.

Main factors

The essence of the economic profile of the sector is to the summary assessment and characteristics of the sector according to the following criteria:

  • Size of the market in units and annual income from the sale,
  • The range of competition,
  • The rate of growth of the market as a percentage of annual sales volume changes,
  • Number of competitors and their relative market shares,
  • The degree of sector concentration,
  • The pace of change in technology of the product,
  • The degree of product differentiation in competitive businesses,
  • The occurrence of the economy of scale effect,
  • The occurrence of a learning effect
  • The expected level of profitability of the sector compared to the average profitability.

Effects of application

The basis of application is the assumption that the essence of strategy is to achieve a competitive advantage in the environment. It is closely related to the use of information to interpret the data and control of the enterprise environment influence over company. Interpretation of the data collected is one of the most important phases of the business intelligence based on knowledge and competencies specific to a given area. However, managers mainly use the output of marketing and strategic analysis methods and tools used for the purposes of interpretation.


Advantages and disadvantages

Advantages:

  • Method is used to describe and comparison of industries

Disadvantages:

  • This method is qualitative in character so comparing of the attractiveness of different sectors is difficult,
  • Criteria useful in the analysis are: economics of scale, the effects of experience, capacity utilization, profitability of the sector.


References